Question

Prehistory: Workers Compensation

At the turn of the century in 1900, Teddy Roosevelt was president, and the United States was entering what came to be known as the Progressive Era. Roosevelt championed a series of antitrust enforcement efforts designed to reduce the influence of manufacturing, transportation, and oil firms that had grown large during the Industrial Revolution. Women’s suffrage was seri- ously debated. At the state level, there were efforts to shorten the workweek, limit child labor, and deal with workplace injury.

Under common law, employers were liable for injuries that occurred at their facilities if the employer was negligent. Employers had three defenses against negligence claims. First, they could argue that the worker had assumed the risk as part of the employment contract. Second, they could argue that the injury was caused by the negligent acts of a coworker rather than those of the employer. Third, they could argue that the worker was at least partially at fault. Injuries were common, and court cases seeking to determine negli- gence and obtain awards for damages were common. Fishback and Kantor (2000) argue that state workers’ compensation laws arose because workers’ rights advocates saw such reforms as a means of shifting the costs of work- place injury to the employer. Employers saw the reforms as a way to reduce the legal costs associated with negligence claims and to increase the payments to injured workers while reducing overall costs.

Between 1910 and 1915, 32 states enacted workers’ compensa- tion insurance. Under these programs, employers accepted full liability for workplace injuries and could buy insurance coverage through their state. If employers purchased workers’ compensation insurance, they retained all three legal defenses against negligence. However, if they did not buy cover- age, they were denied these defenses.

Organized medicine supported the workers’ compensation legislation apparently under the view that injured workers would go to their family doc- tor for care, and the doctor would be paid by the workers’ compensation fund. Instead, however, employers began to directly retain and sometimes employ physicians to provide care. This followed the model of some firm- specific clinics in the mining and lumber industries, notably in the states of Minnesota and Washington, respectively (Starr 1982). As a result, the major- ity of local physicians saw a reduction in the demand for their services. Those who had employer contracts did better, of course.

All of this background is relevant because it affected the design of sub- sequent health insurance plans. Numbers (1979) and Starr (1982) describe the political dynamics. In the period leading up to and following World War I, a number of state initiatives proposed compulsory health insurance based on the workers’ compensation model. One plan, promoted by the American Association of Labor Legislation, called for coverage of all manual laborers with income of less than $100 per month for medical bills and lost income. Compulsory contributions from the employee, the employer, and the state government would be included. Those who were not in a covered group could join voluntarily.

Between 1916 and 1919, 16 states considered such legislation; none adopted it. Employers tended to oppose this legislation because, unlike workers’ compensation, it did not have any offsetting reduction in costs. Labor unions had mixed views. Samuel Gompers, the founder of the Ameri- can Federation of Labor (AFL), was opposed. He believed that workers knew how to spend their money and the role of the union was to get them more money to spend. The American Medical Association (AMA) officially favored this legislation in 1915 but opposed it by 1920, arguing that the insurance interfered with the doctor–patient relationship. Indeed, the expe- rience with workers’ compensation suggested as much. Physician opposition could be intense

1. summarize the prehistory of workers compensation.

Answer 1

The history of compensation for bodily injury begins shortly after the advent of written history itself.

The first such law was, the law of Ur, wrote in 2050 B.C. provided monetary compensation for specific injury to workers' body parts, including fractures. Ancient Greek, Roman, Arab, and Chinese law provided sets of compensation schedules, with precise payments for the loss of a body part. The concept of impairment which was separate from disability had not risen yet.

The main events in the development of modern workers' compensation law occurred in the setting of Prussia under the improbable leadership of its stern Chancellor, Otto von Bismarck. He adopted a system of social insurance. His first foray into the field was through the Employers' Liability Law of 1871, providing limited social protection to workers in certain factories, quarries, railroads, and mines. Later, and far more importantly, Bismarck pushed through Workers' Accident Insurance in 1884 creating the first modern system of workers' compensation. This was followed over the next few years by Public Pension Insurance providing a stipend for workers incapacitated due to non-job related illnesses and Public Aid providing a safety net for those who were never able to work due to disability.

However, such changes were slower in the United States. As early as 1893, the Department of Labor prepared a report by J. G. Brooks on the topic Compulsory Insurance in Germany⁷. Congress passed the Employers' Liability Acts of 1906 and 1908, softening the common-law doctrine of contributory negligence. The first comprehensive workers' compensation law was finally passed shortly thereafter in Wisconsin in 1911. The final state to pass workers' compensation legislation was Mississippi in 1948. The various workers' compensation statutes in America are all modeled loosely after the original Prussian system. All American workers' compensation schemes are fully employer-funded either by the purchase of commercial insurance or setting up a self-insurance account.